October 30, 2008

The Texas Railroad Commission has issued a ruling allowing more than two dozen east Fort Worth landowners who didn’t sign a mineral rights lease to be forcibly included in a drilling plan, a move that gives producers added leverage against leasing holdouts. It is the first time the commission, which regulates the oil and gas industry in the state, has used a 1965 law to take such action, called a force pooling, against small land owners. Experts said the ruling is particularly applicable in urban areas, where hundreds of small tracts often must be assembled, or pooled, into a drilling unit. Jacqueline Weaver, a University of Houston law professor who has written extensively on Texas oil and gas law, said the issues involved are important enough that they likely will have to be resolved by state courts. Historically, she said, the Mineral Interest Pooling Act has been used to protect small land owners from getting squeezed out of drilling units, rather than forced into one.

“It sets a precedent,” Weaver said of the August ruling. “Horizontal drilling is going gangbusters in the Barnett Shale, and other producers will have the same difficulties.” To see the Railroad Commission examiner's original ruling, the revised ruling and the final order, click here and then click on the third item from the bottom, titled "Application of Finley Resources, Inc. ..."